Exhibit 99.1
Schnitzer Steel Reports 321% Rise in First Quarter Net Income
PORTLAND, Ore.--(BUSINESS WIRE)--Jan. 7, 2004--Schnitzer Steel
Industries, Inc. (Nasdaq:SCHN) today reported net income of $12.2
million or $0.59 per diluted share on revenues of $128.4 million for
the first fiscal quarter ended Nov. 30, 2003. In comparison, the
Company reported net income of $2.9 million or $0.15 per diluted share
on revenues of $90.7 million for the quarter ended Nov. 30, 2002.
"It's a pleasure to report another strong quarter for Schnitzer
Steel," said Robert W. Philip, president and chief executive officer.
"Net income was up 321% from the first quarter of fiscal 2003 on a 42%
rise in revenues. Overall, the Company's first quarter results ended
in the range we expected with average selling prices for both ferrous
metals and finished steel rising above the levels reported in the
first quarter of fiscal 2003 and the fourth quarter of last fiscal
year. Operating profits in our various metals recycling businesses, as
well as the Auto Parts Business, showed good improvement from the
first quarter of last year. The Steel Manufacturing Business also
showed improvement over last year's first quarter; however, the
results were lower than we anticipated due primarily to a higher than
expected rise in recycled metal costs."
"In early December, China's Bureau of National Statistics
announced that with one month to go before year-end, China had already
become the first nation ever to produce more than 200 million tons of
raw steel in a single year," said Philip. "Looking back just three
years to 2000, China produced an estimated 129 million tons of steel
representing 16% of the world's production. Today, it's anticipated
that China will produce approximately 215 million tons of crude steel
in all of 2003 representing nearly 23% of the world's total estimated
production. This growing steel production is directly increasing
demand and prices for recycled ferrous metal. Schnitzer Steel,
together with its joint venture businesses, is the nation's largest
exporter of ferrous recycled metal and is well positioned to continue
to benefit from this growth in demand."
Metals Recycling Business
The Metals Recycling Business reported operating income of $9.9
million in the first quarter of fiscal 2004, an improvement of $6.8
million or 221% over the same quarter last year. The higher operating
profit was primarily caused by improvements in both sales volumes and
average selling prices, which rose by 39% and 37%, respectively, over
the first quarter of fiscal 2003. First quarter sales volumes are
normally lower than the other three fiscal quarters of each year due
to seasonal variations in demand; however, last year's first quarter
sales volume was unusually low due to an intentional delay in placing
orders by certain Asian customers. Ultimately, the volume was sold in
the second quarter of fiscal 2003. In comparison, first quarter 2004
quarterly sales volumes were more typical, considering normal seasonal
variations in demand. Moreover, this quarter's sales volumes would
have been higher except that one 30,000 ton export cargo that was
anticipated for the first quarter of fiscal 2004 was delayed and
shipped during the first week of December 2003.
The higher first quarter 2004 selling prices were caused by
increasing Asian demand, primarily from China. The higher selling
prices and sales volumes were partially offset by increases in the
cost of unprocessed metal coupled with rising ocean freight rates,
which were 50% higher in the fiscal 2004 first quarter as compared to
the prior year quarter.
Joint Venture Businesses
Income from Joint Ventures amounted to $5.9 million for the first
quarter of fiscal 2004 compared to $3.2 million in last year's first
quarter. The higher fiscal 2004 quarterly income resulted from
improved operating profits for the joint ventures in the metals
recycling business, which were affected by many of the same factors
impacting the Company's own wholly owned Metals Recycling Business.
The Joint Ventures recent quarterly results were also affected by
shipping delays that deferred export cargoes into the second quarter
of fiscal 2004.
Auto Parts Business
The Auto Parts Business reported operating income of $5.9 million
in the first quarter of fiscal 2004, which was a $0.7 million or 13%
improvement over the fiscal 2003 quarter. The profit improvement
principally came from the wholesale side of the business, which
experienced increasing prices for recycled metal and higher wholesale
parts sales volume.
Steel Manufacturing Business
The Steel Manufacturing Business reported an operating loss of
$0.1 million for the first quarter of 2004, which was a $1.1 million
improvement from last year's first quarter. The improved operating
margin was driven principally by higher selling prices and increased
sales volumes. First quarter 2004 selling price averaged $310 per ton,
which was slightly less than anticipated, but was a $26 per ton (9%)
improvement over the first quarter of last year. The higher selling
prices were primarily caused by market price increases implemented to
offset the sharp rise in raw material and energy costs. Sales volumes
amounted to 163,000 tons in the first quarter of 2004, an increase of
14% from the 2003 first quarter. The higher sales volume was primarily
caused by industry consolidation, modest increases in end user demand
and lower steel imports resulting from the weakness in the U.S. dollar
coupled with the rising cost of ocean freight. Partially offsetting
the higher selling prices and volumes was an unexpectedly sharp
increase in the spot market purchase prices for ferrous recycled
metals sold and brokered to the Company's steel mill.
Outlook
The Metals Recycling Business normally accepts orders 60 to 90
days before shipment. Based upon the Metals Recycling Businesses'
second quarter 2004 order backlog, contracted selling prices are, on
average, higher than the amount realized in the first quarter of
fiscal 2004, and significantly higher than the amount reported during
last year's second quarter. The higher selling prices are expected to
be tempered by rising ocean freight rates as well as upward pressure
on the cost to purchase metal from suppliers. Sales volumes are
anticipated to be in the range of 520,000 to 550,000 tons. Similar
market factors are expected to affect our joint ventures in the metals
recycling business.
On Dec. 4, 2003, President Bush terminated the steel import
tariffs that were enacted in March 2002. The tariffs affected two of
the Steel Manufacturing Business's three major production lines,
namely rebar and merchant bar products. It has been management's
belief that the tariffs, when enacted, did not significantly benefit
the pricing of the Company's products. Thus, the President's decision
to rescind the tariffs is not expected to significantly affect the
prices of these products going forward. Management anticipates the
domestic economy will continue to improve, which should benefit the
Company's Steel Manufacturing Business. However, second quarter demand
and sales volumes are traditionally the lowest of the four fiscal
quarters due to seasonal and weather factors. Over the last few
months, the Steel Manufacturing Business and its competitors announced
a number of price increases, which led to higher selling prices. Two
additional announced price increases totaling $40 per ton on rebar and
merchant bar are expected to take effect in the second quarter of 2004
and should result in higher average selling prices. The higher selling
prices should mitigate the rise in recycled metal and energy costs.
The Steel Manufacturing Business also received $1.8 million during the
second quarter as a final payment regarding an electrode price fixing
settlement that was settled in favor of a number of steel mills,
including the Company. This amount will be recognized as income from
operations during the second quarter of fiscal 2004.
Due to adverse weather conditions, the second quarter of each
fiscal year is seasonably slow for the Auto Parts Business in terms of
retail sales. The slower retail sales are expected to be partially
offset by stronger wholesale revenues.
Overall, the Company estimates its second quarter 2004 income from
operations to be in the $19 million to $22 million range. This amount
compares to income from operations of $13.1 million reported for the
second quarter of fiscal 2003.
The Company anticipates that its effective tax rate will continue
to benefit from net operating loss carryforwards that were acquired as
part of a 1996 acquisition as well as from Extraterritorial Income
Exclusion benefits associated with certain export sales. These, as
well as other factors, should result in an effective fiscal 2004 tax
rate in the high twenty percent range.
Schnitzer Steel Industries, Inc. is one of the nation's largest
recyclers of ferrous metals, a manufacturer of finished steel products
and a leading self-service auto parts and dismantling company. The
Company, with its joint venture partners, processes approximately 4.9
million tons of recycled ferrous metals per year. In addition, the
Company's steel mill has an annual production capacity of
approximately 700,000 tons of finished steel products. The Company and
its joint venture partners operate primarily along the West Coast and
Northeastern seaboard of the United States.
This news release, particularly the "Outlook" section, contains
forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, which are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. One can generally identify these forward-looking statements
because they contain "expect", "believe", "anticipate", "estimate" and
other words that convey a similar meaning. One can also identify these
statements, as they do not relate strictly to historical or current
facts. Examples of factors affecting both Schnitzer Steel Industries,
Inc.'s consolidated operations and its joint ventures (the Company)
that could cause actual results to differ materially from current
expectations are the following: volatile supply and demand conditions
affecting prices and volumes in the markets for both the Company's
products and raw materials it purchases; world economic conditions;
world political conditions; changes in federal and state income tax
laws; foreign currency fluctuations; competition; seasonality,
including weather; energy supplies; freight rates; the predictability
of joint venture operating results; and the inability to complete
expected large scrap export shipments in the current quarter, all as
discussed in more detail under the heading "Factors That Could Affect
Future Results" in the Company's most recent annual report on Form
10-K. One should understand that it is not possible to predict or
identify all factors that could cause actual results to differ from
the Company's forward-looking statements. Consequently, the reader
should not consider any such list to be a complete statement of all
potential risks or uncertainties. The Company does not assume any
obligation to update any forward-looking statement.
For more information about Schnitzer Steel Industries, Inc. go to
www.schnitzersteel.com.
SCHNITZER STEEL INDUSTRIES, INC.
FINANCIAL HIGHLIGHTS
(in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended
November 30,
---------------------------
2003 2002
------------- -------------
REVENUES:
Metals Recycling Business:
Ferrous sales $ 65,894 $ 33,930
Nonferrous sales 12,409 10,115
Other sales 1,299 1,529
------------- -------------
Total sales 79,602 45,574
Auto Parts Business 17,660 16,139
Steel Manufacturing Business 53,219 42,830
Intercompany sales eliminations (22,105) (13,876)
------------- -------------
Total $128,376 $ 90,667
============= =============
INCOME (LOSS) FROM OPERATIONS:
Metals Recycling Business $ 9,923 $ 3,096
Auto Parts Business 5,889 5,208
Steel Manufacturing Business (142) (1,257)
Joint ventures 5,937 3,175
Corporate expense (2,646) (2,024)
Intercompany eliminations (856) 573
------------- -------------
Total $ 18,105 $ 8,771
============= =============
NET INCOME $ 12,177 $ 2,891
============= =============
BASIC EARNINGS PER SHARE $ 0.62 $ 0.16
============= =============
DILUTED EARNINGS PER SHARE $ 0.59 $ 0.15
============= =============
SHARE INFORMATION (THOUSANDS):
Basic shares outstanding 19,721 18,410
============= =============
Diluted shares outstanding 20,631 18,710
============= =============
SCHNITZER STEEL INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share amounts)
For the Three Months Ended
November 30,
--------------------------
2003 2002
------------- ------------
(Unaudited)
Revenues $128,376 $90,667
------------- ------------
Costs and expenses:
Cost of goods sold and other
operating expenses 106,698 76,780
Selling and commission expenses 1,278 1,185
General and administrative expenses 8,232 7,106
------------- ------------
Income from consolidated operations 12,168 5,596
Income from joint ventures 5,937 3,175
------------- ------------
Income from operations 18,105 8,771
Other income (expense):
Interest expense (440) (380)
Other income (expense), net 204 (203)
------------- ------------
(236) (583)
------------- ------------
Income before income taxes 17,869 8,188
Income tax provision (5,182) (2,015)
------------- ------------
Income before minority interests, pre-
acquisition interests and cumulative
effect of accounting change 12,687 6,173
Minority interests, net of income taxes (510) (447)
Pre-acquisition interests, net of income
taxes - (1,852)
------------- ------------
Income before cumulative effect of change
in accounting principle 12,177 3,874
Cumulative effect of change in accounting
principle - (983)
------------- ------------
Net income $ 12,177 $ 2,891
============= ============
Basic earnings per share $ 0.62 $ 0.16
============= ============
Diluted earnings per share $ 0.59 $ 0.15
============= ============
Schnitzer Steel Industries, Inc.
Selected Operating Statistics
(Unaudited)
Q1 FY04 Q1 FY03 Q2 FY03
----------- ----------- -----------
Metals Recycling Business
Ferrous Recycled Metal Sales
Prices ($/LT)
Domestic $ 135 $ 100 $ 108
Export $ 144 $ 104 $ 113
Average $ 140 $ 102 $ 111
Ferrous Sales Volume (LT)
Domestic Processed(a) 99,781 113,439 95,277
Domestic Brokered(a) 73,366 38,890 57,462
Export 235,481 142,199 402,437
---------- ---------- ----------
Total (a) 408,628 294,528 555,176
========== ========== ==========
(a) Includes sales to the Steel
Manufacturing Business 157,989 114,988 140,823
========== ========== ==========
Steel Manufacturing Business
Sales Prices ($/NT)
Rebar $ 308 $ 273 $ 269
Other $ 313 $ 293 $ 299
Average $ 310 $ 284 $ 283
Sales Volume (NT)
Rebar 91,204 64,652 74,160
Wire Rod 43,020 50,216 37,790
Other 28,370 27,470 25,099
---------- ---------- ----------
Total 162,594 142,338 137,049
========== ========== ==========
Joint Ventures Ferrous Recycled
Metal Sales Volume
Processed (LT) 674,622 635,899 941,220
Brokered (LT) 677,395 470,304 304,068
---------- ---------- ----------
1,352,017 1,106,203 1,245,288
========== ========== ==========
Q3 FY03 Q4 FY03 FY03
----------- ----------- -----------
Metals Recycling Business
Ferrous Recycled Metal Sales
Prices ($/LT)
Domestic $ 125 $ 119 $ 114
Export $ 140 $ 144 $ 127
Average $ 133 $ 137 $ 122
Ferrous Sales Volume (LT)
Domestic Processed(a) 132,217 82,087 423,020
Domestic Brokered(a) 60,322 75,376 232,050
Export 239,801 372,658 1,157,095
---------- ---------- ----------
Total (a) 432,340 530,121 1,812,165
========== ========== ==========
(a) Includes sales to the Steel
Manufacturing Business 144,274 134,787 534,872
========== ========== ==========
Steel Manufacturing Business
Sales Prices ($/NT)
Rebar $ 282 $ 298 $ 282
Other $ 305 $ 303 $ 300
Average $ 293 $ 300 $ 291
Sales Volume (NT)
Rebar 88,323 99,829 326,964
Wire Rod 47,469 51,016 186,491
Other 28,418 27,170 108,157
---------- ---------- ----------
Total 164,210 178,015 621,612
========== ========== ==========
Joint Ventures Ferrous Recycled
Metal Sales Volume
Processed (LT) 880,173 865,255 3,322,547
Brokered (LT) 387,336 674,753 1,836,461
---------- ---------- ----------
1,267,509 1,540,008 5,159,008
========== ========== ==========
Note: Price information is shown after a reduction for the cost of
freight incurred to deliver the product to the customer
CONTACT: Schnitzer Steel Industries, Inc.
Barry Rosen, 503-323-2720 (Financial Contact)
Tom Zelenka, 503-323-2821 (Press Contact)
www.schnitzersteel.com